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| Nicknames | Hawley–Smoot Tariff, Smoot–Hawley Tariff |
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| Enacted by | the71st United States Congress |
| Citations | |
| Public law | Pub. L. 71–361 |
| Statutes at Large | ch. 497, 46 Stat. 590 |
| Codification | |
| U.S.C. sections created | 589 |
| Legislative history | |
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| Major amendments | |
| Moving Americans Privacy Protection Act | |
TheTariff Act of 1930 (codified at19 U.S.C. ch. 4), commonly known as theSmoot–Hawley Tariff orHawley–Smoot Tariff,[1] was a law that implementedprotectionist trade policies in the United States. Sponsored by SenatorReed Smoot and RepresentativeWillis C. Hawley, it was signed by PresidentHerbert Hoover on June 17, 1930. The act raised U.S.tariffs on more than 20,000 imported goods.[2]
Excluding duty-free imports, when enacted, the tariffs under the act were the second highest in United States history, exceeded by only theTariff of 1828.[3] The act prompted retaliatory tariffs by many other countries.[4]
The act and tariffs imposed by U.S.'s trading partners in retaliation were major factors in the reduction of American exports and imports by 67% during theGreat Depression.[5]
Economists and economic historians have agreed that the passage of the Smoot–Hawley Tariff worsened the effects of the Great Depression.[6]
TheLeague of Nations held aWorld Economic Conference at Geneva in 1927 and its final report concluded that "the time has come to put an end totariffs, and to move in the opposite direction". Vast debts and reparations from World War I could be repaid only through gold, services, or goods, but the only items available on that scale were goods.
Many of the governments represented by the delegates to the conference did the opposite, however, and in 1928, France was the first, passing a new tariff law and quota system.[7]
By the late 1920s, the U.S. economy had made exceptional gains in productivity because ofelectrification, which was a critical factor inmass production. Another contributing factor to economic growth was replacing horses and mules with motorcars, trucks, and tractors. One-sixth to one-quarter of farmland that had been devoted to feeding horses and mules, was freed up, contributing to a surplus in farm produce. Although nominal and real wages had increased, they did not keep up with theproductivity gains.
Senator Smoot contended that raising the tariff on imports would alleviate the overproduction problem, but the market reality was that the United States had been running atrade account surplus, and although manufactured goods imports were rising, manufactured exports were rising even faster. Food exports had been falling and were in a trade account deficit, but the approximate values of food imports only amounted to half the value of manufactured imports.[8]
As the global economy entered the first stages of theGreat Depression in late 1929, the main goal of the U.S. was to protect its jobs and farmers from foreign competition. Smoot championed another tariff increase within the United States in 1929, which became the Smoot–Hawley Tariff Bill. In his memoirs, Smoot made it abundantly clear: "The world is paying for its ruthless destruction of life and property in theWorld War and for its failure to adjust purchasing power to productive capacity during theindustrial revolution of thedecade following the war."[9]
Smoot was aRepublican fromUtah and chairman of theSenate Finance Committee.Willis C. Hawley, a Republican fromOregon, was chairman of theHouse Committee on Ways and Means. During the1928 United States presidential election, one ofHerbert Hoover's campaign promises was to help beleaguered farmers by increasing tariffs on agricultural products. Hoover won, and Republicans maintained comfortable majoritiesin the House andthe Senate during 1928. The House passed a version of the act in May 1929, increasing tariffs on agricultural and industrial goods alike. The House bill passed on a vote of 264 to 147, with 244 Republicans and 20 Democrats voting in favor of the bill.[10] The Senate debated its bill until March 1930, with many members trading votes based on industries in their states. The Senate bill passed on a vote of 44 to 42, with 39 Republicans and 5 Democrats voting in favor of the bill.[10] Theconference committee then unified the two versions, largely by raising tariffs to the higher levels passed by the House.[11] The House passed the conference bill on a vote of 222 to 153, with the support of 208 Republicans and 14 Democrats.[10]
In May 1930, a petition was signed by 1,028 economists in the United States asking President Hoover to veto the legislation. The petition had been organized byPaul Douglas,Irving Fisher, James T. F. G. Wood,Frank Graham, Ernest Patterson,Henry Seager,Frank Taussig, andClair Wilcox.[12][13] Automobile executiveHenry Ford also spent an evening at theWhite House trying to convince Hoover to veto the bill, calling it "an economic stupidity".[14]J. P. Morgan's Chief ExecutiveThomas W. Lamont said he "almost went down on [his] knees to beg Herbert Hoover to veto the asinine Hawley–Smoot tariff".[15]
While Hoover joined the economists in opposing the bill, calling it "vicious, extortionate, and obnoxious" because he felt it would undermine the commitment he had pledged to international cooperation, he eventually signed the bill after he yielded to influence from his own political party (Republican), his Cabinet (who had threatened to resign), and other business leaders.[16] After the bill had become law, in retaliation, Canada and other countries raised their own tariffs on U.S. goods.[17]Franklin D. Roosevelt spoke against the act during his successful campaign for president during 1932.[11]
Most of the decline in trade was due to a plunge in GDP in the U.S. and worldwide. However, beyond that was an additional decline. Some countries protested and others also retaliated with trade restrictions and tariffs. American exports to the protesters fell 18% and exports to those who retaliated fell 31%.[18] Threats of retaliation by other countries began long before the bill was enacted into law in June 1930. As the House of Representatives passed it in May 1929, boycotts broke out, and foreign governments moved to increase rates against American products, although rates could be increased or decreased by the Senate or by the conference committee. By September 1929, Hoover's administration had received protest notes from 23 trading partners, but the threats of retaliatory actions were ignored.[11]
In May 1930, Canada, the most loyal trading partner for the U.S., retaliated by imposing new tariffs on 16 products that accounted altogether for approximately 30% of U.S. exports to Canada.[19] Later, Canada also forged closer economic links with theBritish Empire via theBritish Empire Economic Conference of 1932. France and Britain protested and developed new trade partners. Germany developed a system of trade via clearing.
The depression worsened for workers and farmers despite Smoot and Hawley's promises of prosperity from high tariffs; consequently, Hawley lost re-nomination, while Smoot was one of 12 Republican Senators who lost their seats inthe 1932 elections, with the swing being the largest in Senate history (being equaled in1958 and1980).[20] Nations other than Canada that enacted retaliatory tariffs included Cuba, Mexico, France, Italy, Spain, Argentina, Australia, New Zealand, and Switzerland.[4]
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In the two-volume series published by the U.S. Bureau of the Census, "The Historical Statistics of the United States, Colonial Times to 1970, Bicentennial Edition", tariff rates have been represented in two forms. The dutiable tariff rate peak of 1932 was 59.1%, second only to the 61.7% rate of 1830.[21]
However, 63% of all imports in 1933 were not taxed, which the dutiable tariff rate does not reflect. The free and dutiable rate in 1929 was 13.5% and peaked under Smoot–Hawley in 1933 at 19.8%, one-third below the average 29.7% "free and dutiable rate" in the United States from 1821 to 1900.[22] The average tariff rate, which was applied on dutiable imports,[23][24] increased from 40.1% in 1929 to 59.1% in 1932 (+19%).[23][24]
At first, the tariff seemed to be a success. According to historianRobert Sobel, "Factory payrolls, construction contracts, and industrial production all increased sharply." However, larger economic problems loomed in the guise of weak banks. When theCreditanstalt ofAustria failed in 1931, the global deficiencies of the Smoot–Hawley Tariff became apparent.[16] U.S. imports decreased 66% from $4.4 billion (1929) to $1.5 billion (1933), and exports decreased 61% from $5.4 billion to $2.1 billion. GNP fell from $103.1 billion in 1929 to $75.8 billion in 1931 and bottomed out at $55.6 billion in 1933.[25] Imports from Europe decreased from a 1929 high of $1.3 billion to just $390 million during 1932, and U.S. exports to Europe decreased from $2.3 billion in 1929 to $784 million in 1932. Overall, world trade decreased by some 66% between 1929 and 1934.[26]
Unemployment was 8% in 1930 when the Smoot–Hawley Act was passed but the new law failed to lower it. The rate jumped to 16% in 1931 and to 25% in 1932–1933.[27] There is some contention about whether this can necessarily be attributed to the tariff.[28][29] TheGreat Depression was already in motion before Smoot-Hawley, mainly due to financial instability, falling demand, and poor banking practices. However, the tariff worsened the crisis by shrinking global trade, hurting farmers, and reducing employment in export-dependent industries. Had it not passed, the Depression still would have occurred, but perhaps with less severity.
It was only duringWorld War II, when "the American economy expanded at an unprecedented rate",[30] that unemployment fell below 1930s levels.[31] Imports during 1929 were only 4.2% of the U.S. GNP, and exports were only 5.0%.Monetarists, such asMilton Friedman, who emphasized the central role of the money supply in causing the depression, considered the Smoot–Hawley Act to be only a minor cause for theGreat Depression in the United States.[32]
The 1932Democratic campaign platform pledged to lower tariffs. After winning the election, PresidentFranklin D. Roosevelt and the now-Democratic Congress passedReciprocal Trade Agreements Act of 1934. This act allowed the president to negotiate tariff reductions on a bilateral basis and treated such a tariff agreement as regular legislation, requiring only a majority, rather than as a treaty requiring a two-thirds vote. This was one of the core components of the trade negotiating framework that developed after World War II.
After World War II, that understanding supported a push toward multilateral trading agreements that would prevent similar situations in the future. While theBretton Woods Agreement of 1944 focused on foreign exchange and did not directly address tariffs, those involved wanted a similar framework forinternational trade. PresidentHarry S. Truman launched this process in November 1945 with negotiations for the creation of a proposedInternational Trade Organization (ITO).[33]
As it happened, separate negotiations on theGeneral Agreement on Tariffs and Trade (GATT) moved more quickly, with an agreement signed in October 1947; in the end, the United States never signed the ITO agreement. Adding a multilateral "most-favored-nation" component to that of reciprocity, the GATT served as a framework for the gradual reduction of tariffs over the subsequent half century.[34]
Postwar changes to the Smoot–Hawley tariffs reflected a general tendency of the United States to reduce its tariff levels unilaterally while its trading partners retained their high levels. The American Tariff League Study of 1951 compared the free and dutiable tariff rates of 43 countries. It found that only seven nations had a lower tariff level than the United States (5.1%), and eleven nations had free and dutiable tariff rates higher than the Smoot–Hawley peak of 19.8%, including the United Kingdom (25.6%). The 43-country average was 14.4%, which was 0.9% higher than the U.S. level of 1929, demonstrating that few nations were reciprocating in reducing their levels as the United States reduced its own.[35]
In 1993, in discussion leading up to the passage of theNorth American Free Trade Agreement (NAFTA), then-Vice PresidentAl Gore mentioned the Smoot–Hawley Tariff as a response to NAFTA objections voiced byRoss Perot during adebate they had onThe Larry King Show. He gave Perot a framed photograph of Smoot and Hawley shaking hands after passage of the act.[11] In April 2009, then-RepresentativeMichele Bachmann made news when, during a speech, she referred incorrectly to the Smoot–Hawley Tariff as "the Hoot–Smalley Act", misattributed its signing toFranklin D. Roosevelt, and blamed him for theGreat Depression.[36][37][38] The act has been compared to the 2010Foreign Account Tax Compliance Act (FATCA), with Andrew Quinlan from theCenter for Freedom and Prosperity calling FATCA "the worst economic idea to come out of Congress since Smoot–Hawley".[39]
Prior to 2016, the Tariff Act provided that "[a]ll goods, wares, articles, and merchandise mined, produced, or manufactured wholly or in part in any foreign country byconvict labor or/andforced labor or/and indentured labor under penal sanctions shall not be entitled to entry at any of the ports of the United States" with a specific exception known as the "consumptive demand exception", which allowed forced labor-based imports of goods where United States domestic production was not sufficient to meet consumer demand.[40] The exception was removed underWisconsin RepresentativeRon Kind's amendment bill that was incorporated into the Trade Facilitation and Trade Enforcement Act of 2015 and signed by PresidentBarack Obama on February 24, 2016.[41]
During his2024 political campaign,Donald Trump pledged to institute similar tariffs.[42]
In its annual forecast supplement for the global economy that was published in November 2024 ('Year Ahead' for 2025),The Economist observed that [in the wake of the Tariff Act] "... global trade fell by two-thirds. It was so catastrophic for growth in America and around the world that legislators have not touched the issue since. 'Smoot-Hawley' became synonymous with disastrous policy making".[43]
In the 1986 film,Ferris Bueller's Day Off,Ben Stein, playing a high school economics teacher, references the tariff in a lecture to his students.[44][45][46]
The tariff act is heavily featured in the humorous 1989 bookDave Barry Slept Here: A Sort of History of the United States by author and columnistDave Barry.[47]
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